Xiaomi gears up to double local phone production

The plant, which has been set up by the world’s largest contract manufacturer Foxconn, has already begun operations, but will take time to attain full capacity.Gulveen Aulakh | ET Bureau | September 06, 2016, 08:22 IST

NEW DELHI: Xiaomi is setting up its second assembly plant in partnership with Foxconn in Sri City, Andhra Pradesh, which is likely to more than double its local manufacturing facility and pitchfork the Chinese smartphone maker into the top league of those who are producing devices in India.

The plant, which is likely to have a production capacity of upwards of two million units a quarter, will peg the Beijing-based company just behind the likes of Samsung, Micromax and Intex among the top local producers of handsets in India.

“The new plant will be twice the existing capacity, which can go up further,” said a person aware of the details of the manufacturing facility, requesting anonymity. Foxconn may combine capacities of both assembly plants into an exclusive space inside its own campus in Sri City.

Xiaomi declined comment while and Foxconn did not respond to queries seeking confirmation as of Monday press time. The plant spread across 65,000 sq ft will house production lines for most of Xiaomi’s smartphones sold locally.

The plant, which has been set up by the world’s largest contract manufacturer Foxconn, has already begun operations, but will take time to attain full capacity.

At present, Xiaomi sells between 1 million and 1.5 million phones a quarter from Foxconn’s existing facility and about 75 per cent of these phones are made locally. Samsung is the country’s largest phone manufacturer, including smartphones and featurephones. According to data with Indian Cellular Association, Intex and Micromax make 3 million and 2 million phones a month, respectively, from local facilities.

A large majority of these phones are featurephones. Details of production levels segregated for smartphones across all factories were not immediately available. Others including Lenovo-Motorola that has 6 million a year capacity, besides Vivo, Oppo, Gionee and LeEco are yet to attain large volume numbers.

Xiaomi is the fastest Chinese company to begin manufacturing smartphones in India, within six months of announcing its intent, last year. In March this year, top leadership at the company told ET that Xiaom will expand manufacturing in India with two new plants, and aimed to operationalize one of them this year, as it wanted to increase its presence in the fastest growing smartphone market worldwide that it pegs as its most important international market.

The company’s aggressive manufacturing based expansion comes on the back of a weak-launch 2015 during which it was beefing up local operations, after sales service and put in efforts to tailormake products for India.

The Chinese smartphone maker has rejigged its strategy and since the beginning of 2016, launched four phone models, far higher than the entire 2015 where it launched only one new model.

The company has managed now to become the third largest smartphone brand in top 30 cities, piping Lenovo and Intex but behind Samsung and Micromax in a highly competitive offline market.

Xiaomi was the No 3 brand in the offline space, with 8.1 per cent share, trailing market leader Samsung, which had a 28.5 per cent share, and No 2 Micromax, which had a 11.9 per cent share, in the quarter ended June 2016.

The key to its success was the direct-to-retail move where it cut out middle men when it ventured offline and managed to meet retail demands without shelling out large margins to distributors.

Another key to its turnaround in India was Redmi Note 3, which sold more than 1.5 million units since launch early this year but goes out of stock as soon as it arrives on retail shelves online and offline. Rising local manufacturing capacity will ensure local demand is met faster.

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